This report will look at the factors that are likely to affect USD exchange rates in the short term if you are buying abroad or making a currency transfer.

No surprise – US keep interest rates on hold

As I have predicted since the start of 2016 the Federal Reserve disappointed the market Wednesday evening by keeping interest rates on hold at 0.5%.

Chairlady Janet Yellen testified Wednesday evening and explained there was a stronger case to raise rates however not strong enough. It has been noted that three Federal Reserve officials were in favour of hiking rates as they believe recent economic progress supports it.

Personally I believe the reason why the FED are reluctant to hike interest rates is because of the upcoming Presidential elections in November. This theory is certainly supported by journalists in the states as Janet Yellen was asked numerous times about the election and in particular the influence of Donald Trump throughout her question and answer session on Wednesday evening.

The general consensus on the market is that Hilary Clinton is the safer bet out of the two nominees and consequently the economy should continue to perform as it has been in recent months if she is elected. Whereas Donald Trump is a risk, therefore this causes volatility which in turn could devalue the US Dollar.

Looking ahead, as I have explained in today’s sterling section I wouldn’t be surprised to see a contraction in the UK economy in the upcoming months, however I also believe the US dollar will weaken in the build up to the election. The question is which currency will devalue more than the other? As GBPUSD is sitting at close to 30 year highs the safe bet for US dollar sellers would be to take advantage whereas US dollars buyers may wish to continue to monitor the market and take advantage of any spikes.

If you need to sell or buy US dollars in the upcoming months I would recommend getting in touch to discuss your requirements and one of the experienced traders here will devise a strategy that works for you. You can reach our trading floor on 01494 725353. Alternatively, you can email me directly at drl@currencies.co.uk.

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Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.